Every year millions of Americans file for bankruptcy protection. Unfortunately, many do so without fully understanding the process, whether they really needed to file, and whether Chapter 7 or Chapter 13 might be the best choice for them.
- Understanding your bankruptcy options
Before filing any type of bankruptcy, you need to review your options. Chapter 7 bankruptcy is the most common bankruptcy filed, but if you want to keep your assets or if your income is too high you will have to file Chapter 13 bankruptcy.
Some businesses may also choose to file Chapter 11 bankruptcy to allow for the restructuring of their debt payments, to provide additional time to repay their financial obligations, and to keep their business running.
Certain entities will also be restricted in the type of bankruptcy they can file. For example, corporations and Limited Liability Companies will not be able to file Chapter 13. Sole proprietorships, however, may be able to file Chapter 7 or Chapter 13.
So who do you need to talk to if you are not sure about your options? The first step is to review the laws in your state. Next, consult with a bankruptcy lawyer to find out if bankruptcy is right for you.
- Bankruptcy costs more than you think
Filing bankruptcy can be expensive, especially if you decide to hire a lawyer. In fact, many individuals complain that they are too poor to file bankruptcy.
What types of costs can you expect to pay? Every bankruptcy filing has a filing fee: Chapter 7 costs $306, Chapter 11 cost $1,213, and Chapter 13 cost $281. Filers will also be expected to pay for credit counseling and additional fees if they need legal help.
- You don’t have to hire a lawyer but you might want one
The good news is you can save hundreds of thousands of dollars filing bankruptcy without legal help; the bad news is the laws can be so complicated- especially if you have property to protect- that filing without legal help can be dangerous.
- You cannot hide your debts or assets
Filing bankruptcy will require the disclosure of a great deal of financial information and intentionally hiding assets or debts or giving away certain property can be considered fraud. Items that you will be required to disclose will include your assets and liabilities, income, expenditures, debts, contractual information, lease information, and any assets which might be excluded or protected under state of federal laws.
- Bankruptcy is not for everyone, and it may not eliminate your debts
Finally, it’s important to understand the limitations of filing for bankruptcy protection. There are certain unsecured debts that cannot be discharged. Specifically, bankruptcy does not discharge most student loans, most recent taxes, court restitution orders, child support, spousal support or criminal fines. Secured debt is also not discharged by filing bankruptcy.
So with this in mind, if you have thousands of dollars in unpaid child support, a mortgage you cannot afford, and a DUI fine…bankruptcy is probably not your best option.
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